Stanford scholar examines how international institutions evolve when confronted with rising countries

What happens when rising countries like China, India and Brazil collide with international organizations still operating from a post-World War II landscape?

That’s the question Phillip Lipscy, assistant professor of political science at Stanford University, addresses in his new book, Renegotiating the World Order. Lipscy analyzes how influential global organizations like the U.N. Security Council and International Monetary Fund react, or, in some cases, don’t react to pressures exerted by rising nations. While the influence of these international organizations has increased stability and peace, Lipscy details the hurdles rising countries must overcome to have a seat at the global table. He also discusses how established countries like the United States exert their influence in these matters.

My book examines how countries renegotiate their position in the world order. I specifically look at international institutions like the United Nations Security Council, International Monetary Fund (IMF), and European Union (EU). These institutions play important roles in the international system and they are often contested by countries that seek greater influence. I show that renegotiation plays out differently depending on the institution’s policy area: institutions in competitive policy areas tend to adjust flexibly or collapse as states exit, while institutions in noncompetitive policy areas can remain relevant even while resisting change.

Why is understanding institutional change in international relations important?

Before the early 20th century, renegotiating the world order often meant acquiring a strong military and fighting or coercing other countries. As I argue in the book, several transformations have made peaceful renegotiation more viable. Military confrontation has become more costly with the advent of nuclear weapons, and several factors – like joint democracy and economic interdependence – have made conflict less likely. At the same time, the rise of international institutions gives countries mechanisms to gradually and peacefully elevate their influence in the international system.

What motivates countries to pursue institutional change?

The motivations vary. The common theme is a sense of unfairness. For example, Japan’s economy grew rapidly after the conclusion of World War II in 1945. Japanese leaders felt that their country deserved international recognition and respect, but they were frustrated that their status in international institutions lagged behind. Japan has never been a permanent member of the U.N. Security Council, and Japan ranked fifth in IMF voting power in 1980 despite having the world’s second-largest economy. Japanese nationals remain underrepresented in most international organizations, particularly in leadership posts. More recently, policymakers in countries like China and India have expressed similar frustrations.

Is this an important aspect of U.S. foreign policy as well?

Institutional change is not just a foreign policy priority for rising states. The United States has also sought institutional change on numerous occasions. For example, the U.S. has been critical of U.N. agencies that give only one vote to each member state while assessing financial contributions according to economic size. This creates situations where the U.S. pays the largest share of an agency’s budget but gets routinely outvoted by countries paying much less. The U.S. has pulled out of several international organizations over this type of concern. The U.S. withdrew membership from the United Nations Educational, Scientific and Cultural Organization (UNESCO) in 1985 after accusing the institution of over-representing Soviet interests. In the International Fund for Agricultural Development, the U.S. renegotiated voting rules in its favor by threatening to withdraw funding.

Can you talk about the role policy areas, both competitive and noncompetitive, play in international institutions?

One of the key theoretical insights of the book is that characteristics of policy areas have predictable effects on political institutions, just like markets affect private firms. International institutions sometimes operate in policy areas where competition is fierce, like development aid. In these policy areas, it is easy to create alternative institutions or bargain for better outcomes by threatening exit. On the other hand, creating competition in the policy area of the IMF is challenging: to address international financial crises, you need adequate resources, access to sensitive information, and political cover provided by broad membership. It is very difficult to create a successful competitor to the IMF from scratch. This limits the bargaining power of dissatisfied states and effectively locks them in, even if they believe the institution is fundamentally unfair.

Your book points out that the composition of some of the world’s most important organizations – U.N. Security Council, IMF – are based on the world order in the immediate aftermath of WWII. What does it say that the makeup of these notable organizations hasn’t changed significantly in more than 70 years?

There has been some change. For example, the U.N. Security Council added some nonpermanent members in 1965 and the IMF has redistributed voting power on several occasions. However, it is also true that these institutions reflect what I call a “World War II effect.” The permanent five members of the U.N. Security Council are essentially the major Allied Powers of World War II, excluding important countries like Japan, Germany, India, and Brazil. Similarly, I show that the Axis Powers from World War II remain underrepresented in important areas like IMF voting shares and leadership positions in major international organizations. It is remarkable that some institutions are able to maintain these types of imbalances for many decades despite fundamental shifts in the international system: this is one of the puzzles that motivated me to write the book.

Recently, Harvard political scientist Graham Allison has argued that the U.S. and China may be “destined for war” because of China’s rising power. Do you agree with this?

China is vested in the international status quo to a much larger degree than historical rising powers. China’s economic rise in part has been fueled by economic openness promoted by the U.S. and major international organizations like the IMF and World Trade Organization. There are some exceptions, like development aid institutions, where Chinese dissatisfaction has led to the creation of alternative institutions. In my view, China’s new institutions, like the Asian Infrastructure Investment Bank, illustrate how China can increase its international influence and prestige without resorting to violence or coercion. Rather than seeing these institutions as threats, the U.S. should welcome them and cooperate with China to shape their trajectory.

Does your book have any implications for President Trump’s policies toward international institutions?

The president wants to cut U.S. budgetary contributions toward international institutions like the United Nations. This has been something of a partisan issue for many years with Republican administrations pushing for similar policies: it is rooted in suspicion toward big government and unaccountable bureaucracies. It is true that international organizations can become inefficient and wasteful, so maintaining accountability is helpful and necessary. However, I worry that President Trump’s approach will be blunt and ineffectual. Combined with understaffing at the State Department, arbitrary budget cuts could put the U.S. at a serious diplomatic disadvantage as other countries seek to expand their international influence: precisely the type of international renegotiation that my book highlights.